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The establishment of an early warning system to brace for the crisis in the petrochemical industry of Korea

Author Yongwon Cho Date 2017.05.17 Issue No
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It is expected that recent environment of the petrochemical industry at home and abroad will influence on conditions of the petrochemical industry of Korea. In order to come up with strategies to respond to changes of external environment out of the petrochemical market, it seems necessary to have an early warning system that can predict the crisis of Korea’s petrochemical industry. An early warning system needs to observe changes of market environment at home and abroad and identify major economic variables that can affect conditions of Korea’s petrochemical industry in the future. Based on that, it should predict the crisis of the petrochemical industry of Korea in advance. After analyzing the crisis of Korea’s petrochemical industry, it turned out that the industry underwent a crisis in 2009 during the global financial crisis, and conditions of items for example, synthetic rubber and raw materials of synthetic fiber, have recently been exacerbated. Based on that, leading indicators were identified to sensor a crisis of Korea’s petrochemical industry, using external economic variables. With identified leading indicators, possibility of crisis in Korea’s petrochemical industry was measured, and it turned out that crisis of items, for example, synthetic rubber and raw materials of synthetic fiber, was more likely to take place than before. Possibility of a risk occurrence by item seems to move with a similar tendency with the actual export record. Synthetic resin has increasing demand in the East Asian region, above all, demand of ABS and PS products, while basic petrochemical has increasing demand for importing PX products from China. Therefore, domestic production of the petrochemical industry tends to be expanded. On the other hand, synthetic rubber products seem to have increasing possibility of risk occurrence as prices of oil continue to be low, and raw materials of synthetic fiber is deemed to have oversupply as the largest export market, China, increased its self-sufficiency ratio. Therefore, it is necessary to continuously monitor changes of market environment concerning items of raw materials of synthetic fiber and synthetic resin.